Tax credits should create jobs, not 'zones': Editorial

Argument over the fate of the state's enterprise zone program is so fierce it's easy to miss this truth: Tax credits for underemployed workers aren't going anywhere.

Or they are, just not in the way enterprise zone supporters claim. Gov. Jerry Brown has proposed eliminating the enterprise zones because he and others believe the program is little more than a shell game. Enterprise zones were created in the mid-1980s as a way to encourage business development and job growth in economically depressed areas of the state. For years, Brown and others say, enterprise zones have benefited some communities at the expense of others by moving jobs from city to city.

Under his proposal, enterprise zones would be dismantled but the program's tax incentives would remain -- rebranded, refocused and available to a larger pool of companies. Moving jobs from city to city shouldn't be the point of the program, Brown correctly points out, but the state still has an interest in putting paychecks in the hands of underemployed workers.

That's what should make it possible for supporters of reasonable government reform to endorse Brown's plan, outlined in Senate Bill 434. State legislators should get on board as they finalize the budget this week.

Currently, enterprise zones across the state offer businesses tax breaks for hiring and capital investments. In Los Angeles, Long Beach, Pasadena and San Bernardino, for example, businesses in enterprise zones have benefited from tax credits of $37,000 per qualified employee -- those who meet one of 11 criteria established by the state.

Under the governor's proposal, the $750 million enterprise zone program would be dismantled but those dollars would be rebranded in a new program providing hiring and capital-improvement tax breaks to companies statewide.Sounds an awful lot like the current program, no? The difference -- and it's important to the state's long-term economic outlook -- is that hiring credits under the new plan would not be retroactive. Enterprise zone supporters argue that extending the credits retroactively aids with employee retention, but Brown is right when he says tax incentives should support job growth. That's what his reforms would ensure.

And communities with high unemployment and poverty -- cities like San Bernardino, which the enterprise zones were truly meant to help -- will continue to be supported by the revamped program. Brown plans to make tax credits available to companies anywhere that hire workers (veterans, the long unemployed and those collecting public assistance, especially) living in such neighborhoods. The enterprise zone program has done some great things in the state's more depressed communities. But it's also had its share of problems, including lax oversight and questionable management of the state's precious tax dollars, as The Sacramento Bee recently detailed. (Tax breaks for strip clubs? Yes. That happened.)Supporters' criticisms of the governor's plan gloss over these very real concerns in favor of maintaining the status quo -- because that's worked out so well for California in the past, right?

Reforms proposed for enterprise zones are practical and fall in line with Brown's efforts to streamline state government. Overhauling the bureaucracy while protecting benefits for those who truly need assistance is a sound plan. Lawmakers should give it their full support.